Mainland listings propel local exchange onto the world map

MAINLAND COMPANIES listed in Hong Kong comprised 39 per cent of the stock exchange's total market capitalisation at the end of last year, according to a report by PricewaterhouseCoopers (PwC). In terms of market turnover, these mainland companies accounted for 46 per cent of the exchange's annual turnover for 2005.

In market capitalisation terms, Hong Kong was placed eighth in a ranking last year of the world's largest financial centres and second in Asia, according to the Securities and Futures Commission. Ahead of it in the rankings were New York, Tokyo, Nasdaq, London, Euronext (Amsterdam, Brussels, Lisbon and Paris), Toronto and Germany.

'Mainland companies account for a significant portion of the Hong Kong exchange's market capitalisation,' said Richard Sun Po-yuen, head of PwC's Capital Market Services Group in Hong Kong.

'They have been using Hong Kong as a platform to tap international funds, and they have contributed a lot to help Hong Kong build up its international presence among global capital markets,' Mr Sun said.

The growing Chinese economy is the key attraction to overseas investors. Having maintained gross domestic product growth of around 8 per cent in the past decade, China's continued economic strength will be supported by its full accession to the World Trade Organisation next year and a commitment to fully open up its markets.

For global institutional and retail investors there are concerns regarding investing in a mainland company. Despite rapid development and economic growth, China is in transition to a full market-based economy, which is why there are still restrictions on some commodity prices. The central government, for example, subsidises petrol companies, which are unable to pass on oil price rises to domestic customers because of government-imposed price restrictions.